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Professional Reputation, Cash, and Transition to Entrepreneurial Activity

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renucci1.pdf (206.1Kb)
Date
2005
Dewey
Organisation et finances d'entreprise
Sujet
Corporate finance; Econométrie; Professional reputation; entrepreneurship
JEL code
L26
Conference name
AFFI 2005 (Association Française de Finance)
Conference date
12-2005
Conference city
Paris
Conference country
France
URI
https://basepub.dauphine.fr/handle/123456789/2710
Collections
  • DRM : Publications
Metadata
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Author
Loss, Frédéric
Renucci, Antoine
Type
Communication / Conférence
Item number of pages
34
Abstract (EN)
We analyze the role of professional reputation in the transition to entrepreneurial activity when credit is rationed. We study an employee's willingness to allow the market to learn information about talent by choosing more or less informative projects. This choice impacts the employee's incentives to exert effort, which determines the wage, and in turn the cash to be invested in the business venture. We show that reputation and cash are substitutes in overcoming credit rationing. However, maintaining a good reputation conflicts with accumulating cash. Hence, employees adopt a different strategy depending on their initial reputation. Besides, starting a business venture early can in expectation be easier than waiting in order to build a reputation and accumulate cash.

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